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Cost cutting pays dividends for Queensland miners

Cost cutting pays dividends for Queensland miners

Photo by Bloomberg

4th May 2015

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Cost cutting measures from the Queensland resources sector have resulted in 43% of the Queensland Resources Council’s (QRC’s) members now falling within the lowest quartile of the global cost curve, the industry body reported on Monday.

This was compared with only 19% a year ago.

“The pain of cost cutting has certainly paid dividends for many of our companies; however, the proportion of operations in the top two cost quartiles has increased from 19% to 28%, putting these operations at risk,” QRC CEO Michael Roche said.

At current spot prices, 43% of Queensland’s thermal and 5% of coking coal production was lossmaking.

However, for the oil and gas industry, the story was much more positive.

“Compared with a year ago, Queensland now has 20% of oil and gas operations in the bottom 25% of global costs and 60% in the bottom two quartiles. The softening of the Australian dollar, with most contracts negotiated in American dollars, has also assisted our sector.”

The QRC reported that while the oil and gas industry was yet to return to the situation in 2008, when all Queensland operations were in the bottom two quartiles, as the liquefied natural gas (LNG) projects moved out of construction and into operations, there were signs that these operations would move down the global cost curve.

Meanwhile, key service providers such as rail, port, water and power were still earning solid returns on the back of ‘take or pay’ contracts where mines paid for contracted capacity regardless of whether it was used, Roche said.

“I know the Queensland government is watching on with interest,” he said.

“With their royalties set against sale prices, every fall in commodity prices drags down royalty revenues. Such a reality confronts Treasury as they work towards the July state budget.”

The QRC’s latest industry report, meanwhile, noted that coal exports in the December quarter were up 4% from 55-million to 57-million tonnes, while coal exports in 2014 reached a record 216-million tonnes, equating to a 10% increase on that of 2013.

Most commodities recorded higher volumes over the December quarter. Aluminium increased from 143 000 t to 145 000 t; bauxite increased from 6.8-million to 6.9-million tonnes; copper increased from 63 000 t to 75 000 t; lead increased from 108 000 t to 121 000 t, and zinc increased from 228 000 t to 311 000 t.

Gold production remained constant at 4 t, and only alumina and silver had reduced production volumes, from 1.5-million to 1.4-million tonnes, and from 340 t to 289 t respectively.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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